Democrats Attack Western Republicans for Refusing to Support Electricity
Price Controls

DATE: 5/30/01

BACKGROUND: Democrats have launched a campaign attacking
eight western Republican Members of Congress for, at least until
now, refusing to support wholesale price controls for electricity
in the West, particularly California. The Republicans are Doug
Ose, Steve Horn and Gary Miller of California; Jennifer Dunn and
George Nethercutt of Washington; Heather Wilson and Joe Skeen
of New Mexico as well as Tom Tancredero of Colorado. They are
considering adding Dennis Rehberg of Montana to their target list.
TEN SECOND RESPONSE: Price controls would be the straw that
breaks the back of California's energy crisis, quickly leading
to greater shortages and, eventually, higher prices for electricity.

THIRTY SECOND RESPONSE: Price controls simply do not
work and invariably lead to greater shortages of supply and higher
prices. When Richard Nixon instituted price controls in the 70s
(the only such action ever taken in peacetime) he touched off
severe shortages followed by a decade or the highest inflation
in the nation's history - inflation that ran through the Ford
and Carter administrations, contributing to an early end to their
presidencies. Allen Greenspan has been successfully fighting destructive
inflation for years but price controls would surely undo all his
efforts.

DISCUSSION: Price controls on electricity would do several
things - all bad. First, they would not make available one new
watt of electricity. In fact, they could well induce producers
to sell their power elsewhere. Secondly, they discourage conservation
by companies and individuals by keeping prices lower than they
would otherwise be. And, in the long run, they inhibit investment
in facilities to generate electricity because investors shy away
from heavily government-controlled industries. This, in turn leads
to long-term shortages and even higher prices, paid either directly
by consumers or indirectly through tax subsidies.

At the heart of California's electricity crisis is the fact that
they have not built new generating or transmission capacity in
10 years - while demand soared - primarily due to the burdens
of New Source Review as practiced by the previous Democratic administration.
Protests and lawsuits by environmental organizations have been
another contributing factor.

Tom Knudsen, writing in the May 16 Sacramento Bee, outlines
how one power company, Duke Energy, had to pay what amounted to
"environmental bribes" to get four environmental groups
to sign an agreement that they would not sue to stop the expansion
of their Moss Landing Power plant. The $1 million payment to these
groups was part of a $12 million package the company paid to a
variety of civil, government and environmental groups to buy their
cooperation with the needed expansion. The complete story should
be available at http://www.sacbee.com
and you can reach Mr. Knudsen, who has done an extensive series
on the workings of environmental groups, at [email protected].

As for New Source Review, which has changed 26 times in the last
four years, it is complex, uncertain and capricious - and more
stringently practiced in California than anywhere else in the
nation. To see a list of the hundreds of varying interpretations
of New Source Review, you can go to: http://www.epa.gov/region07/programs/artd/air/nsr/nsrindex.pdf
.